Nigerian government advises citizens to save for the rainy day by investing in its savings bond

|  By Anayo Ezugwu  |  Apr 17, 2017 @ 01:00 GMT  |

DESPITE the economic challenges facing Nigerians, the federal government is determined to encourage its citizens to develop the culture of saving for the rainy day. The government is urging Nigerians to save by investing in the federal government of Nigeria Savings Bond, FGNSB.

The application for subscription to the second tranche of its FGNSB opened on Tuesday, April 4, and closed on Friday, April 7. The bond is an addition to the federal government securities market and is a retail savings product accessible to all income groups. The purpose of the bond is to encourage national savings culture and create an avenue for investors to benefit from the favourable returns available in the capital market.

The federal government had listed the maiden tranche of the FGNSB on the Nigeria Stock Exchange, NSE, with a promise that it will continue to issue the savings bond as a regular instrument in the Nigerian capital market. In the maiden offer of the FGNSB which ran between March 13, and March 17, 2017, the total number of subscription was 2,577 bids with total volume of N2.067 billion.

The minimum subscription for the FGNSB has been fixed at N5,000 while the maximum subscription for the new security is fixed at N50 million. The coupon, which is the yield the bond paid on its issue date, will be paid quarterly while there will be a bullet repayment of the principal at the end of the tenor, otherwise known as maturity date or redemption date.

At the listing of the 13.01 percent N2.067 billion Series 1 FGN Savings Bonds 2019 at the NSE in Lagos, Abraham Nwankwo, director general, Debt Management Office, DMO, said the FGNSB will become a perpetual instrument of the government with the overreaching aim of opening up the benefits from the national economic development to the generality of Nigerians.

Nwankwo described the maiden offer as successful, citing the spread of the bids with about 95 percent of the bids from individual Nigerians of average means ranging from artisans to low-income earners across the various geopolitical zones of the country. He said the maiden offer had successfully achieved the aim of opening up the debt capital market to the retail investors in furtherance of the commitment of the government to ensure inclusive growth.

The FGNSB will be issued every month and the listing on the exchange has provided additional opportunities in terms of ability of the retail investors to recoup their savings whenever they want. The FGNSB will enhance the savings culture among Nigerians as well as provide all citizens irrespective of income level, an opportunity to contribute to national development while earning decent returns.

Haruna Jalo-Waziri, executive director, Nigerian Stock Exchange, NSE, said the FGNSB was an innovative investment offering that caters to the retail segment of the Nigerian capital market. The successful launching of the first tranche underpinned the efforts by the federal government to continue to work with stakeholders to deepen the capital market while delivering value to investors at all income levels. “We look forward to continue the collaboration with DMO to list subsequent series of the savings bond,” Jalo-Waziri said.

Kayode Omoregie, lecturer, Lagos Business School, LBS, said the FGNSB is a good development and that Nigerians should key into it.  “The bond is acceptable as collateral for loans by banks and can be sold for cash in the secondary market before maturity. It is also good for savings towards retirement, marriage, school fees, house projects, among others.

The FGNSB is an investment product to be issued by the federal government through the DMO. The FGNSB is expected to be issued monthly in tenure of two and three years through an offer for subscription. The subscription period would be opened for five working days, within which investors can submit their subscription through authorised distribution agents.

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